How to Use Student Loans for Living Expenses

When considering the use of student loans to help defray living expenses, there are two main considerations: how to obtain a student loan for cost of living expenses, and how those funds should be used once they are obtained. It is easy to take the attitude that as long as there is money available, there is no reason not to take advantage of the opportunity to improve one’s situation. Like credit cards, however, there is a back-end cost that should be carefully understood before proceeding. Understanding the ramifications of these types of loans may impact one’s interest in taking them on, and can, at least, affect the way one behaves once they are obtained.

Securing a Cost of Living Loan

The first issue to consider is how to obtain a student loan for cost of living expenses. In most cases, schools have projected the cost of an average year for a student, including books, tuition, housing and food. This will be a published number and will correspond directly to what level of funding the school’s office of financial aid will support with a lender. As most lenders look to the school for a realistic assessment of what is reasonable, this number is critical.

In cases where a student has atypical circumstances, such as children, an unemployed spouse or an unusually long commute, a financial aid counselor may be willing to endorse a higher level of borrowing with the student’s lender of choice. This level of borrowing will usually involve taking on private student loans, over and above the maximum allowed as Stafford loans, but with the school’s endorsement, even under the more stringent borrowing standards currently being followed, applying for and receiving these loans is achievable.

Pro and Cons of Cost of Living Loans

The next, and far more important issue, is whether these loans are advisable and how to spend the money once it is received. As with most things, there are circumstances and situations in which taking cost of living loans is appropriate, and there are instances where they are a bad idea.

Some of the critical factors to keep in mind are that most employers who are willing to help with student loans after graduation as an added perk of employment, limit this assistance to tuition and occasionally to the cost of books. They are willing to help reduce a student’s debt burden, but not pay for non-specific costs.

Regardless of repayment options, every student should keep in mind that even though these loans do not have to be serviced while one is still enrolled in school, interest accrues the entire time the loan is outstanding – this adds significantly to the ultimate cost of the loan. Living as frugally as possible while enrolled in school, and augmenting one’s disposable income with a part-time job, will yield significant benefits after graduation.

To begin your career digging out of debt hole has become part of today’s reality. Use cost of living loans to survive, not to live well because doing so while one is a student will delay one’s ability to live well after graduation significantly.


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